Introduction to Accounting and Finance

Flashcards covering key vocabulary related to Introduction to Accounting and Finance.

Sole Trader

A business owned and operated by a single individual who has unlimited liability.

Partnership

A business structure where two or more individuals share management, profit, and liability.

Corporation

A legal entity that is separate from its owners, granting limited liability to shareholders.

Non-for-profit Organization

An entity that does not distribute profits to owners, using all revenue for its objectives.

Financial Accounting

An accounting branch focused on reporting financial information to external users.

Management Accounting

An accounting branch focused on providing financial information for internal management.

Assets

Resources owned by a business that provide future economic benefits.

Liabilities

Obligations of a business to pay debts to outsiders.

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities.

Gross Profit

The difference between sales revenue and the cost of goods sold.

Net Profit

What remains from gross profit after all expenses have been deducted.

Carriage Inwards

Transportation costs for goods purchased, added to purchases.

Carriage Outwards

Transportation costs for goods sold, recorded as an expense.

Trial Balance

A statement listing all debit and credit balances to ensure they are equal.

Double Entry System

An accounting method where every transaction affects at least two accounts.

Accounting Equation

The fundamental equation: Assets = Liabilities + Owner’s Equity.

Financial Statement

Formal records of the financial activities of a business.

Year-end Adjustments

Corrections made to financial statements to reflect accurate financial position.

Ratio Analysis

A technique used to evaluate the financial performance of a business through ratios.